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‘Godzilla’ El Nino could put excitement in cotton market

“In the United States, we could see plantings increase from 8.6 million acres to a little over 9.1 million acres in 2016,” he said. “We could have pretty decent yields (of 828 pounds per acre) and 14.7 million bales in production. If we have a strong El Nino, it could easily be back 13 to 13.2 million bales this next year."

How strong will it be? That has become the question of the year or maybe the decade for folks in the western half of the U.S. But it could also have a major impact on how much cotton the world’s farmers produce in the coming year.

Jarral Neeper, president of Bakersfield, Calif-based Calcot, gave two scenarios that could develop from the El Nino phenomenon that is current playing out in the Pacific Ocean when he presented the 2016 Cotton Market Outlook at the Beltwide Cotton Conferences in New Orleans Wednesday (Jan. 6).

One, for a “mild” El Nino, would have world cotton area down 1.5 to 2.5 percent in 2016. World production would rise 1.5 percent to 104.4 million bales because Neeper anticipates yields will rebound this year. World consumption would rise to 112.5 million bales and world ending stocks would decline 7 to 8 percent to 97.2 million bales.

“You would expect world ending stocks to fall below 100 million bales to somewhere around 97 million bales,” said Neeper. “This would be the first time since 2012 that ending stocks would be below 100 million bales.”

The second scenario? “If we have a very strong El Nino, as is currently predicted – the Godzilla of El Ninos – and world area down 1.5 to 2.5 percent,” he said, “Then world production could fall to 96 to 98 million bales as yields could be impacted. World consumption could be up a little bit, and if world consumption goes up and production goes down, world stocks could drop below 90 million bales.

‘Pretty exciting’ year

“So El Nino is going to make 2015-16 pretty exciting,” Neeper said. “We could see some pricing volatility. I think we could make a run to the low 70s as we move forward. It won’t be nearly as severe as 2010, but it should give some opportunities for pricing.”

Neeper told about 100 audience members he would not expect those opportunities to occur right away. “We’re going to have to wait until we get into late spring and early summer to see how all this plays out before it starts getting exciting.

The current El Nino, which is the term used to describe a warming of the water in the Western Pacific, is the strongest in recorded history for the October, November and December period. Some observers put its size at 6 million square miles.

“Of course, this El Nino is the big unknown,” Neeper said. “The one in 2015 actually covers a wider area than the one in 1997, which is what the current phenomenon is being compared to as far as its scope.”

There was an indication the Southern Oscillation Index or SOI declined somewhat in November and December. “That’s making people think maybe El Nino won’t be nearly as strong, but that’s not unusual,” says Neeper.

SOI decrease not unusual

“I’ve looked at that SOI Index going back all the way to 1951, and you can certainly have some periods of relief if you will but still have a very strong El Nino. The strength of it will be determined as we get farther into January, February and March.”

Several recent surveys have indicated U.S. growers will plant more cotton in 2016. Under fairly normal circumstances, Neeper believes some of those predictions could come true.

“Here, in the United States, we could see plantings increase from 8.6 million acres to a little over 9.1 million acres in 2016,” he said. “We could have pretty decent yields (of 828 pounds per acre) and 14.7 million bales in production. If we have a strong El Nino, it could easily be back 13 to 13.2 million bales this next year.

“Don’t expect to see a large increase in acres,” Neeper notes. “That’s sort of changing on a day-by-day basis. This is kind of a snapshot. I saw one survey that came out the other day at a little over 9 million acres so mine is a little higher. I’ve seen some acreage estimates of 11 million acres. I don’t know what those people are smoking. It would be great to see 11 million, but I just don’t think that will happen.”

Neeper said he believes a modest increase will occur, “but any increase is a good increase. We need to keep our place in the world as far as production and supplying the world with high-quality fiber.”